We are four decades into a major political and economic experiment. What happens when the United States and other major nations weaken their laws meant to control the size of industrial giants? What is the impact of allowing unrestricted growth of concentrated private power, and abandoning most curbs on anticompetitive conduct?
The answers, I think, are plain. We have managed to recreate both the economics and politics of a century ago—the first Gilded Age—and remain in grave danger of repeating more of the signature errors of the twentieth century. As that era has taught us, extreme economic concentration yields gross inequality and material suffering, feeding an appetite for nationalistic and extremist leadership. Yet, as if blind to the greatest lessons of the last century, we are going down the same path. If we learned one thing from the Gilded Age, it should have been this: The road to fascism and dictatorship is paved with failures of economic policy to serve the needs of the general public.
Look at the global economy and witness the rule of concentrated oligopolies and monopolies, in industries like finance, media, airlines, and telecommunications, just to name the most obvious—firms whose size allows them to treat customers and competitors with impunity. Most visible in our daily lives is the great power of the tech platforms, especially Google, Facebook, and Amazon, who have gained extraordinary power over our lives. With this centralization of private power has come a renewed concentration of wealth, and a wide gap between the rich and poor.
The concentration of wealth and power has helped transform and radicalize electoral politics. As in the Gilded Age, a disaffected and declining middle class has come to support radically anti-corporate and nationalist candidates, catering to a discontent that transcends party lines. A renewed economic nationalism around the world blames immigrant workers, foreign products, or elite conspiracies for the diminishment of the middle class. There is widespread anger at big business and how they treat customers, especially in concentrated or monopolized industries like insurance, pharmaceuticals, airlines, and other insensitive behemoths. Many fear Google, Amazon, and Facebook, and their power over not just commerce, but over politics, the news, and our private information.
What we must realize is that, once again, we face what Louis Brandeis called the “Curse of Bigness,” which, as he warned, represents a profound threat to democracy itself. What else can one say about a time when we simply accept that industry will have far greater influence over elections and lawmaking than mere citizens? When the American pharmaceutical industry can raise prices by thousands of percent, confident that government will do little or nothing? Where the middle class has no apparent influence on policies like health insurance, taxes, working conditions, housing, or other matters that determine how life is really lived?
We must now face questions that have been ignored for more than a generation. Are extreme levels of industrial concentration actually compatible with the premise of rough equality among citizens, industrial freedom, or democracy itself? Can we create broad-based wealth and a sense of entrepreneurial opportunity in an economy dominated by monopolists? Is there just too much concentrated private power in too few hands, with too much influence over government and our lives?
The questions, I think, answer themselves. The main goal of this short volume is to see how the classic antidote to bigness—the antitrust and other antimonopoly laws—might be recovered and updated to face the challenges of our times. For roughly a century, the antitrust law served in practice and theory as an antimonopoly code that sought to limit excessive industrial concentration and to police monopoly conduct. By the midpoint of the last century, antitrust became widely understood in the Western world as a necessary part of a functioning democracy, as an ultimate check on private power.
Yet over the span of a generation, the law has shrunk to a shadow of itself, and somehow ceased to have a decisive opinion on the core concern of monopoly. The law that the Supreme Court once called a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition” no longer condemns monopoly, but has grown ambivalent, and sometimes even celebrates the monopolist—as if the “anti” in “antitrust” has been discarded.
Most of what follows can be understood to center on the recovery of one principle: that in enacting and repeatedly fortifying the antitrust laws the United States made a critical, indeed Constitutional choice in industrial and national policy. After a period of intense national debate, including a presidential election in 1912 where economic policy was a central issue, the nation rejected a monopolized economy and chose repeatedly over the decades to preserve its tradition of an open and competitive market. The goal of antitrust law must be understood as respecting that choice. Or as Louis Brandeis, the great prophet of a decentralized economy, put it, the antitrust laws answered a question: “Shall the industrial policy of America be that of competition or that of monopoly?”
What happened? The law is currently suffering from an overindulgence in the ideas first popularized by Robert Bork and others at the University of Chicago over the 1970s. Bork contended, implausibly, that the Congress of 1890 exclusively intended the antitrust law to deal with one very narrow type of harm: higher prices to consumers. That theory, the “consumer welfare” approach, has enfeebled the law. Promising greater certainty and scientific rigor, it has delivered neither, and more importantly discarded far too much of the role that law was intended to play in a democracy, namely, constraining the accumulation of unchecked private power and preserving economic liberty. Forty years ago, the famed Robert Pitofsky warned that it is “bad history, bad policy, and bad law to exclude certain political values in interpreting the antitrust laws.” He was right.
Antitrust has fallen into hibernation before as ideologies have shifted, only to come roaring back to meet the needs of the age. To deliver on its mandate, American antitrust needs both to return to its broader goals and upgrade its capacities. It needs better tools to assess new forms of market power, to assess macroeconomic arguments, and to take seriously the link between industrial concentration and political influence. It needs to take advantage of all that economics and other social sciences have to offer. It needs stronger remedies, including a return to breakups, that are designed with the broader goals of antitrust in mind. Finally, it needs to put courts back in the business of policing what Brandeis termed as conduct meant to “suppress or even destroy competition.
The alternative is not appealing. Over the twentieth century, nations that failed to control private power and attend to the economic needs of their citizens faced the rise of strongmen who promised their citizens a more immediate deliverance from economic woes. The rise of a paramount leader of government who partners with monopolized industry has an indelible association with fascism and authoritarianism. It is true that antitrust alone will not cure the curse of bigness or eliminate the excesses of private power. But it strikes at the root, and getting the engines of the law restarted is an important part of dealing with a problem that has reached Constitutional dimensions.
As such, this book is far less radical than it might be. It is actually a call for a middle path, to control economic structure before it controls us. It does not see antitrust as degraded beyond redemption, nor label its practitioners as unprofessional or untalented. It claims, rather, that the law has lost sight of its goals and has subsequently failed in its core mission. The initiatives I propose may combine to go far toward reinvigorating antitrust in our era, restoring it as a check on private power as necessary in a functioning democracy.
Our Gilded Age and Where It May Lead
Once upon a time, the major industrialized nations might have been thought to have learned their lesson. After suffering communist and fascist revolutions, a depression and two catastrophic World Wars, they had collectively changed their approach to the economy and its role in a democracy. Rejecting laissez faire’s rule by the wealthy, communism’s dictatorship of the proletariat, and fascism’s state-directed economy, the West took a different path—the re-democratization of economic policy and a politics of wealth redistribution. That path yielded decades of economic growth that built middle classes, and saw a level of prosperity previously unknown to human history, reducing what had become a massive gap between rich and poor. As such, the economic achievements of Western democracies stole the thunder of both communism and fascism, whose calls for revolution were always driven by the unfairness and cruelty of unfettered capitalism.
No one economic policy overcame the inequalities produced by the Industrial Revolution and the consolidations of late twentieth century. But antitrust laws formed part of the story, meant to break the economic and political power of self-enriching trusts, and to resist the accumulation of wealth in monopoly and concentrated cartels. That was a mission reinforced by the horrible lessons of fascist Germany and Japan, and their close partnerships between government and its main monopolies. One way or another, concentration and inequality had its effects. By the late 1960s, the share of national income going to the top 1 percent of earners had fallen to 8 percent, a far cry from the extreme inequality of the 1910s and 1920s. Seemingly, the capitalist nations had found a way to square the circle, and by promising a wealthy middle class, presented an alluring alternative to the self-enriching dictatorships in other parts of the world.
That was then, and yet here we are again, as if trapped in a bad movie sequel. Today, as in the 1910s, two essential economic facts characterize the industrialized world. The first is the reemergence of an outrageous divide between the rich and the poor. This trend is most stark in the United States, where the top 1 percent today earn 23.8 percent of the national income and control an astonishing 38.6 percent of national wealth.
The second is a return to concentrated economies—that is, industries dominated by fewer and larger companies.* As the World Economic Forum attests, a smaller number of firms and industries control a far greater share of global wealth. In the United States, between 1997 and 2012, 75 percent of American industries became more concentrated. Similarly, since the year 2000, across U.S. industries, the Herfindahl-Hirschman index, which measures market concentration, has increased in over 75 percent of industries. The stock markets have actually shrunk, as the U.S. public markets have lost almost 50 percent of their publicly traded firms.*
The most visible manifestations of the consolidation trend sit right in front of our faces: the centralization of the once open and competitive tech industries into just a handful of giants: Facebook, Amazon, Google, and Apple. The power that these companies wield seems to capture the sense of concern we have that the problems we face transcend the narrowly economic. Big tech is ubiquitous, seems to know too much about us, and seems to have too much power over what we see, hear, do, and even feel. It has reignited debates over who really rules, when the decisions of just a few people have great influence over everyone. Their power feels like “a kingly prerogative, inconsistent with our form of government” in the words of Senator John Sherman, for whom the Sherman Act is named.
With an economy that looks like a knock-off of the Guilded Age, is it any surprise that our politics have come to match it? The late nineteenth and early twentieth centuries were marked by the brutal treatment of workers, the destruction of small-and medium-sized businesses, and broad economic suffering. That led to widespread popular anger and demands for something new and different. Strong leaders promised a return to greatness, bread for the workers, and a new order.
Today, economic grievance is yielding a similar turn to angry, populist answers around the world. Some blame their fortunes on immigrants, Jews, Muslims, Christians, or perhaps the Chinese or the Americans, yielding a new generation of xenophobic, nationalist, and racist politics. Others blame bankers, the tech industry, or corporations in general. We have witnessed a return to the politics of outrage and of violence, one stoked by the humiliations of becoming poorer than one’s parents, of workers who are treated as disposable, and the prospect of falling through the cracks.
The better lesson from the twentieth century is that less angry alternatives work: programs to aid the unemployed and the aged, to protect workers and labor, and other efforts to blunt the harshness and disparity inherent to unrestrained capitalism. And in the United States, there was born a different movement and a different approach to tackling the structural origins of accumulated private power, named after its target, the trusts—hence the “antitrust” laws.
It would be an exaggeration to suggest that antitrust provides a full answer to either inequality or other economic woes. But it does strike at the root cause of private political power—the economic concentration that facilitates political action. Advocating antitrust revival is not meant to compete with other economic proposals to address inequality. But laws that would redistribute wealth are themselves blocked by the enhanced political power of concentrated industries. In this way, the structure of the economy has an underlying influence on everything in the realm of economic policy. If antitrust is not the solution, it, historically, has been part of the solution, meriting a new look at what it can do.
To understand where we are and where we may be going, we must return to a moment in the past when we first began addressing the questions we still face today.
*There is a technical difference between “bigness” and “industry concentration”—the former refers just the size of firms, while the latter refers to the number of firms competing in each properly defined market. However, in practice, the two tend to overlap: When firms are larger in an industry, especially as a result of mergers, there tend to be fewer competing firms in the industry.
*If industry concentration and income inequality are key features of our economic times, are they linked? Many economists think so. See Jonathan B. Baker & Steven C. Salop, Antitrust, Competition Policy, and Inequality, 104 Geo. L.J. Online 1 (2015). But the proposition is not uncontested. See Daniel Crane, Antitrust and Wealth Inequality, 101 Cornell Law Review 1171 (2016). A concentrated industry can tacitly collude to prevent wage growth, yielding less for workers and more for shareholders and management, and be less competitive and more profitable, thanks to the ability to cooperate to keep prices high or jointly exclude entrants. The profits are kept by professionals, senior executives, management, or shareholders, who are wealthier. Concentrated industries can also cooperate politically to prevent redistribution or use government to protect profits.